Correlation Between IShares IBoxx and IShares ETF

Can any of the company-specific risk be diversified away by investing in both IShares IBoxx and IShares ETF at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IShares IBoxx and IShares ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares iBoxx High and iShares ETF Trust, you can compare the effects of market volatilities on IShares IBoxx and IShares ETF and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IShares IBoxx with a short position of IShares ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares IBoxx and IShares ETF.

Diversification Opportunities for IShares IBoxx and IShares ETF

0.96

Correlation Coefficient

IShares IBoxx  IShares ETF

Almost no diversification

The 3 months correlation between IShares and IShares is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares iBoxx High and iShares ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares ETF Trust and IShares IBoxx is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on iShares iBoxx High are associated (or correlated) with IShares ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares ETF Trust has no effect on the direction of IShares IBoxx i.e., IShares IBoxx and IShares ETF go up and down completely randomly.

Pair Corralation between IShares IBoxx and IShares ETF

Considering the 90-day investment horizon IShares IBoxx is expected to generate 1.37 times less return on investment than IShares ETF. But when comparing it to its historical volatility, iShares iBoxx High is 1.09 times less risky than IShares ETF. It trades about 0.1 of its potential returns per unit of risk. iShares ETF Trust is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,658  in iShares ETF Trust on December 1, 2024 and sell it today you would earn a total of  58.00  from holding iShares ETF Trust or generate 2.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

iShares iBoxx High  vs.  iShares ETF Trust

iShares iBoxx High

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares iBoxx High are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, IShares IBoxx is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares ETF Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares ETF Trust are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, IShares ETF is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with IShares IBoxx and IShares ETF

The main advantage of trading using opposite IShares IBoxx and IShares ETF positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares IBoxx position performs unexpectedly, IShares ETF can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in IShares ETF will offset losses from the drop in IShares ETF's long position.

The idea behind iShares iBoxx High and iShares ETF Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.